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Originally Posted by Harmon
This is not quite correct.
When you sell an item on ebay, the amount you are paid for that item is, legally, "income". All of it. It doesn't matter whether you are in business or not.
However, all of that income is not taxed. You only have to pay tax on the amount of the income in excess of what the item cost you in the first place - i.e., on the profit.
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I'm not sure that's the case. There's a point at which you are considered a trader and if you fall into that definition you must register yourself for tax purposes either as self-employed/sole trader or under a business entity and file appropriate tax returns, even if you've made a loss.
However, there's also sales of goods that do not count
http://www.hmrc.gov.uk/guidance/selling/examples.htm
From what I can gather, there's both intent of profit and other guidelines for whether you fall into the trading category vs just selling old stuff, but there's also a £6,000 individual item limit, where even if you're not selling commercially you've to pay capital gains tax on any item sold worth more than that.
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Example 4
Monique inherits from her grandfather an Impressionist painting valued at £120,000. She puts it into a safe deposit box for nine months whilst she decides what to do with it. As she is getting married later in the year Monique decides to sell it to pay for her wedding.
She puts it up for auction at an established auction house during the tax year 2006/07, and it fetches £194,000.
Monique did not purchase the picture for resale at a profit and is not trading. There is no commerciality to this transaction. However, the picture was worth more than £6,000 when sold, and is not exempt from Capital Gains Tax (CGT).
Because Monique sold the picture for more than its value at the time she inherited it, and made a chargeable gain of more than £8,800 she will be liable to CGT.
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In this example, she's clearly made a profit but it's not considered "income" because of the profit, it's only to be declared because the sale was worth more than £6,000.
It stands to reason you can buy a shirt for £30, then later decide you want to get rid of it and sell it for £60 and not have to declare it. However, if you start buying lots of these shirts at £30 because you know you can make some money on them, you're clearly trading, whether you try to hide the fact or not. Or if the shirt is worth more than £6,000 you've to pay tax.
All that said, I'm not by any means certain, anyone planning to sell items should probably check it out for themselves. As for me, anything I buy with an intention to make money from (whether I do or not), goes into the business. Anything I buy for me/hobbies (that didn't go via the business) and later sell whether at a profit or loss is just money to spend on further hobbies. From what I can tell that falls within the guidelines the HMRC have on their website.